Huiyuan Juice may sell loss-making factories

China Huiyuan Juice plans to sell some loss-making factories to raise its profitability to the industry average, though it expects double-digit percentage growth in revenue for the next few years.

The Hong Kong-listed company is the largest producer of 100 per cent juice and of nectar in China, commanding 54.2 per cent of the mainland's juice market and 44.1 per cent of its nectar market.

"We have 40 factories in China, but some are loss-making. So we will look at how we deal with them in future," vice-president Wang Xunyoung said yesterday. "In the past, we built lots of factories. In future, we want to improve efficiency."

Zhou Hongwei, another Huiyuan vice-president, said: "If necessary, we will dispose of loss-making factories."

The firm hopes to raise its gross profit margin from 28 per cent to between 30 per cent and 35 per cent within three years, Wang said.

The average gross margin in the mainland beverage industry is 35 per cent, which is roughly the gross margin of two other Hong Kong-listed firms that sell beverages, Tingyi and Uni-President China, a Standard Chartered report said.

Last year, Huiyuan's net profit plunged 94.8 per cent to 16.16 million yuan (HK$20.3 million), mainly because of high finance costs arising from a near doubling of its borrowings.